ECB’s Stournaras says higher inflation due to tariffs could delay monetary policy normalization

European Central Bank policymaker Yannis Stournaras said on Tuesday that likely higher inflation and a global trade war following US President Donald Trump’s imposition of tariffs could delay normalization of euro zone monetary policy.

“Any further resurgence in inflation or inflation expectations could delay or even halt the process of monetary policy normalization, worsening financial conditions and growth momentum,” Stournaras, who is governor of the Bank of Greece, said at the Greek central bank’s annual shareholders’ meeting.

A rout in global financial markets triggered by the US tariffs scheme has solidified the case for another ECB rate cut next week and supports arguments for even quicker policy easing from the world’s second largest central bank, economists say.

As well as the United States and Europe, other countries where the US has not imposed duties would feel the pinch of slowing global trade, he said, as global economies were intertwined.

“Tariffs imposed on one country’s imports would affect other countries participating in the global (supply) chains, even if no countermeasures were imposed,” he said.

Greece’s economy, which is expected to grow at a 2.3% this year and continue outpacing its euro zone peers, will see limited direct impact from the US duties, Stournaras said.

But the country, which exports olive oil, oil and its trademark feta cheese to the United States, might see demand for its products and services drop, while rising global uncertainty could dent the appetite for investment in the country as it recovers from a 2009-2018 debt crisis.

“For Greece, the response to these challenges lies with keeping up its reliable fiscal policy, attracting investment and implementing reforms,” he added.

Source: pagenews.gr